By David Winning
SYDNEY--Scentre Group reported a large annual loss, as the impact of the coronavirus pandemic weighed heavily on valuations of its retail property assets.
Scentre, which owns and operates nearly 40 Westfield branded shopping centers, reported a net loss of 3.73 billion Australian dollars (US$2.95 billion) for the 12 months through December, compared to a A$1.18 billion profit a year earlier. The result was dragged down by a reduction in property valuations of A$4.25 billion.
Like many mall owners, Scentre is grappling with lost rent from hard-hit retailers, disruption from lockdowns, and some shoppers becoming leery of visiting enclosed spaces during the pandemic.
Funds from operations--a smoothed measure of operating cash flow that excludes depreciation, amortization and gains on asset sales--fell by 43% to A$766.1 million across the year. Operating profit totaled A$763.4 million, down 40%, although net operating cash flow improved 96% in the second half of the year.
"Whilst uncertainty remains in 2021, subject to no material change in conditions, the group expects to distribute at least 14.00 cents per security for 2021," said Chief Executive Peter Allen. "The distribution is expected to continue to grow in future years."
A key question for mall owners is whether the rollout of vaccines in Australia from this week will encourage shoppers to return, or whether some changes in behavior during the pandemic have become permanent. Many listed retailers this month reported strong growth in online sales of everything from sports equipment to bed linen.
Another uncertainty is whether the withdrawal of government stimulus will lead households to tighten their purse strings. The federal government's flagship JobKeeper wage subsidy program is due to end soon, although lawmakers have pledged to raise unemployment benefits.
"The group collected A$2.059 billion in gross rent collections, including A$641 million during the fourth quarter of 2020, equivalent to 100% of gross billings," Scentre said.
Still, mall owners can expect a tailwind from a benign outlook for interest rates with the Reserve Bank of Australia signaling it won't raise them from a record-low 0.1% for at least three years. Also, rising house prices are driving a wealth effect for many households that could encourage them to buy more furnishings and other items in malls, while the working-from-home trend and halt to international travel are viewed by investors as potential drivers of spending.
"We trialed a number of initiatives, such as aggregated 'click + collect' that facilitated our retail partners connecting with customers during periods of government restrictions," Mr. Allen said. "The learnings form the basis for strategic initiatives we are pursuing."
Demand for space across Westfield Living Centres remained strong with the portfolio 98.5% leased at the end of December, the company said.
Scentre said its gearing--a measure of debt relative to equity--was 27.7% at the end of December.
Write to David Winning at email@example.com
(END) Dow Jones Newswires
February 23, 2021 17:07 ET (22:07 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.